Eager investors, cultural changes will drive construction in 2022
As America emerges from the pandemic, Maryland’s construction industry is facing high investment levels, widespread opportunities in multifamily and industrial construction, efforts to repurpose other properties, and a struggle to spread development more evenly across the region.
Those were some of the findings shared by speakers at BC&E’s 2022 Construction Blueprint Series – Economic Forecast Webinar.
“We really do have what is, in my 40-year history, unprecedented market dynamics,” said John Black, President of MacKenzie Capital. “It’s not like the last recession when there was no money for anyone. There is plenty of capital looking for a home.”
Investors – including banks, bridge lenders, institutional investors and others – are fueling robust development in several sectors, said Brendan Harman, Vice President of MacKenzie Capital. The “darlings of the dance” are multifamily and industrial properties. However, abundant investors and a growing economy are also driving major activity in several “alternative asset classes,” including life science/biotechnology facilities, outdoor industrial/storage properties and developments of single-family rental communities.
“Self storage is absolutely on fire and riding the same multifamily binge,” Black said. Also, “it’s amazing the number of marinas we are working on right now.”
Other real estate sectors are struggling to realign themselves with the new realities of American life.
“God bless retail real estate. It always seems to change and adapt,” Black said. “Some of the big boxes are shuttered and closed, but we are seeing some other users come in – medical office pavilions, doc in a box locations, fitness is still coming strong.”
Investor sentiment around office properties is negative as employers continue to sort out longer term plans for hybrid work or other arrangements. The hospitality sector, which was hobbled during the pandemic, continues to struggle. However, some failing hotels and office buildings (especially properties in downtown cores) are being redeveloped into apartments.
Dr. Seema D. Iyer, Associate Director of the Jacob France Institute and Research Associate Professor at the University of Baltimore, discussed two recently released reports that analyze development trends across Baltimore. The Baltimore Community Change Project 2010-2020 and the Vital Signs 2021 report detailed the divergence of strong, sustained growth in some neighborhoods and persistent decline in others.
The reports also offered insights into the kinds of initiatives needed to spur investment and construction in underdeveloped areas. During the webinar, Iyer compared the performance of Baltimore and Philadelphia over the last 10 years. During that period, Baltimore City lost 5.7 percent of its population while Philadelphia gained 5.1 percent. A key reason, she said, was transit.
“Philadelphia invested in its infrastructure in the 1980s and it is now reaping the benefits of that… Philadelphia transformed itself once the northern line and the southern line got connected at Reading Terminal,” Iyer said. In Baltimore, “we need transportation. One of the biggest challenges in our city is accessibility. Nobody is going to develop in some of these neighborhoods when you can’t physically get there… We are desperate for the city to invest in our infrastructure.”